Medicare Drops Appeal in UnitedHealth Star Rating Lawsuit
(Bloomberg) — US officials dropped their appeal of a UnitedHealth Group Inc. lawsuit challenging the federal Medicare program’s quality ratings, a potential boon for insurers protesting the rankings that drive billions of dollars in payments to private plans.
The Centers for Medicare and Medicaid Services withdrew its appeal in a filing in a Texas federal court Friday. The decision may signal that the Trump administration won’t fight insurance companies arguing their ratings are too low, a critical issue in a pending lawsuit filed by Humana Inc. that could significantly impact its future profitability.
The move is an abrupt reversal of the agency’s stance. Medicare had filed a notice of appeal on Jan. 21, the day after President Donald Trump’s second term began.
A federal judge in November sided with UnitedHealth, saying the US wrongly downgraded the insurance giant’s quality rating. Several health insurers have sued the government over how the ratings, called stars, are calculated. None has more riding on the outcome than Humana, which focuses on private Medicare plans.
Its lawsuit, pending in the Northern District of Texas, seeks to reverse a cut to its star ratings. Analysts have described the outcome of that litigation as a “binary” event for the company because so much of its earnings are linked to Medicare payouts.
The ratings being contested will affect payments in 2026. Analysts from Leerink estimated in November that the lower star ratings would be a $1.8 billion headwind for the company in 2026.
A spokesperson for the US Attorney’s Office for the Eastern District of Texas declined to comment on the reason for withdrawing the appeal. CMS declined to comment, citing the department-wide pause on communications.
UnitedHealth had no immediate comment. The filing was first reported by Stat News.
–With assistance from Ike Swetlitz and Madlin Mekelburg.
(Updates with additional information starting in third paragraph)
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